3.2 Competitive Advantage: a Definition

We are in constant relationship with many organizations. Our world is submitted to regular changes as organizations evolve, come and go. Understanding your memberships and attachments to organizations will help you act on your world. You'll learn how to evaluate the influence of organizations around you and how to transform your relationships to reach a stronger coherence.
Do you feel sometime that the world around you is disorganized? Can you make sense of all the information at your reach and have an impact on this situation? Have you ever thought that this conundrum may be due to all the organizations that emerge, strive or wane, and disappear every day?
Organizations are ubiquitous, from clubs and associations to firms and public agencies. Organizations confer meaning to all of us, and our attachment and membership to organizations have a profound effect on all areas of our lives. But in our increasingly turbulent world, these organizations run the risk of disappearing or losing their legitimacy, steering a sense of pointlessness and absurdity.
This course develops an integrative approach to understanding organizations and their behaviors, termed ‘orgology’. It explains that organizations can act strategically to protect and renew the sense of membership and attachment of individuals. So doing, organizations that survive and thrive impose their logics of action onto society, thereby influencing what is legitimate or not.
In turn, individuals, you, all of us, must reinterpret our multiple associations with organizations and contribute to reinforce or inhibit social evolutions. This new way of understanding organizations’ relationships with society results in reconsidering management and the role of individuals in building their future.
There is no prerequisite to this course, you are all welcome ! Students and people interested in the fields of management, sociology, strategy, economics leadership etc… will benefit a lot from this course.
For the session of this course starting on January 11th, Professor Rodolphe Durand will actively be participating and interacting with learners. He will be offering "office hours" sessions through google hangouts and answering learner questions from the forums. We hope this direct interaction will add to your learner experience! Please enroll today!

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从本节课中

Competition and Competitive Advantage

Competition among and between organizations leads to regular occurrences of disorganization. We’ll present and discuss the sources of competitive advantage, and the meaning of performance and competition.

教学方

Rodolphe Durand

Strategy Professor. GDF-SUEZ Chair holder.

脚本

So we have seen that the logic of the market and the performance test have found their way into many situations, and that, for the past forty years. For organizations and many of us, the effect of the logic of the market is known as competition. We shall now study what competition is and how an organization is more or less well prepared to face it, or maybe to lead it. Competition is derived from the Latin cum, together and petere, to meet, so it means come together. The first notion that the word introduces is thereby the coexistence of many organizations within the boundaries of the public space. In this space, as we saw, organizations can express themselves, sometimes clashing or other times merging, or plain ignoring one another. They are acting following one of the logics of actions that are present in the public space. The dictionary defines also to compete, as to engage in competition in order to to obtain a prize, an honor, or a supremacy. When two or more organizations compete, they meet on common ground, the defined public place, and they strive to achieve the same end. And so, as soon as they are co-present, independently of the logic of action, organizations are in competition for making their solutions prevail over the other organizations' solutions. Competing thus means, finding ways and processes to over perform rivals, those primed to achieve the same objective, i.e : imposing their solutions. In this perspective, a competitive advantage is thus bestowed on the organization that attained this goal in a repeated fashion, on the organization which successively was capable to pass the performance tests successfully. As a rule, competitive advantage is usually measured, taking into account the end result achieved. However, competitive advantage takes distinct forms according to the organization's various purposes, for instance, for an NGO, the number of active members provides an indication of its mobilizing power, the span of the action it carried over the year is another one. For a sport club, the number of prestige and the trophies it has won is the metric. For a company, the performance would be evaluated following different dimensions, the focus may be on the margin, customer satisfaction, profitability, or revenue growth, for instance. However, these types of metrics are only giving a picture of the tip of the iceberg. What matters is both how the organization is positioned in its competitive environment, and also how it combines assets and resources to deliver the solutions available in the public space. Remember, seeing products on the shelves is not the start of competition, it's the result of competition, a bit like considering the fruits of a plant, says little about what are the inputs in the transformations necessary to get these fruits. To illustrate, consider what is currently happening in the mobile phone markets, law suits related to illegal code appropriations and patent infringements have multiplied and are now an integral part of the strategy of the great high tech firms. The series of suits that Apple launched against Samsung are a good illustration, Apple could not take on Samsung's products as copies since there were obvious differences between iPhones and Galaxy phones. Yet, pointing out to similarities in icons' design and to the use of Apple's patented finger gestures by Samsung, it was able to block some of the Korean company's marketing developments in the US and in Germany, blocking it at the root, so to speak. Competitive advantage is therefore a gradual construction and it starts at the very bottom of the solution production process, it is a combination of many decisions and acts that have led ultimately to the materializations of the solution. So in your opinion, What constitutes the competitive advantage of any organization? -The ability of securing the best available resources. -The agility and know-how in maximizing their use. -the capacity of creating meaningful solutions. The answer is that at least one of the three abilities is needed, and the more abilities the company is able to get, the longest lasting the the competitive advantage will be. Superior performance can come from a stroke of luck, having exclusive access to an important raw material, filling a patent for something that will become essential, in the field, contracting with a soon-to-be giant firm. Superior performance can also proceed from simple combination of resources that may not last long. Who remembers the success that the Beanie Babies plush animals toys enjoyed in the 90's? Who recalls what Tamagotchi stands for nowadays? And yet, both were extremely popular toy lines at one point. They came at the right time for an audience looking for new cute things, they were easy enough successes to replicate to the point where the market was saturated by lookalikes, however. When this occurred, the solutions became mundane, not special enough to be adopted, they lost meaning, or rather the meaning moved from the positive, so cute, to the negative, oh not that again! When superior performance comes out of luck, or from a factor easy to imitate, or duplicate, other organizations will soon reduce the source of superior returns as they come up with the same solution. Therefore, superior performance is not the same as competitive advantage, the hard task is, for any organization, to repeat and maintain a superior performance, namely to build a competitive advantage in the long run. Successful organizations are showing remarkable skills at identifying the factors that have led to their successes and creating correct metrics that enable them to keep on going in the same direction. Another condition is that, members of these organizations conspire to make sure that the sets of resources and operating rules are remaining inside the organization for the longest possible time. When sources of a competitive advantage are divulged, competition grabs them and the advantage disappears. As the logic of the market spreads its influence in the public space following the popularity of the performance tests, it becomes more and more important for organizations to conduct analysis on what their competitive advantages are, if they can maintain them, and if so, how. The movie Moneyball offers a perfect illustration of how, by the introduction of systemic performance test metrics, the small ball franchise, the Oakland Athletics, was able to shine in the major league baseball against teams ten times wealthier. The Oakland Athletics' successful methods were soon implemented by all the major league teams however, and the team lost its competitive edge. Competitive advantage results also from the dynamic mix of services and devices and here, the past success of RIM and its Blackberry devices, is a perfect illustration. The company was able to penetrate the enterprise mobile market through a mix of good mobile devices and excellent services for a secured, and fast mail exchange service. The Blackberry initial success turned to a debacle when Apple entered the market with its iPhone, and launched the smartphone era. Since Blackberry was directed towards enterprises, the company solution could not be filled as easily with meaning by the individuals, as it kept its "business only" tag. As we've seen, competitive advantage is fragile. So for you, a competitive advantage is difficult to maintain -because it proceeds from luck, -from the unique vision of the organization's leader. -from a complex assemblage of assets, processes, and meanings. The correct answer, you have understood, is the third one, a competitive advantage is always difficult to maintain in the long run. The organizations must be sufficiently agile to be in a position where they can realize what their competitive advantage is, and what to do to maintain it. As a result, the world that we live in is most unstable, how can organization survive in the long run? This we shall study later. In the next three videos, I will detail competitive advantage, analysis, and provide examples.